The reviews are coming in
and the verdict is clear:

Cracking Health Costs and
Why Nobody Believes the Numbers
are the best books ever written.*

* By me



January 2013 Response to Dr. Dobson

First, I would like to congratulate Dr. Dobson and his team for the passion and dedication that they have brought to CCNC, and the program they have created. The country needs public sector administrators who are willing to take risks, and bring this kind of commitment to their jobs, i.e. more Leslie Knopes and fewer Ron Swansons.

This passion and dedication has created terrific access to care. Were it not for the low scores that North Carolina hospitals receive in the Leapfrog Group surveys (not the fault of CCNC), if I were a Medicaid recipient, I would want to live in North Carolina. Further, I am quite convinced that CCNC might even pay for itself if North Carolina Medicaid were not required to maintain a $3 co-pay for ER visits. That $3 co-pay policy dates to the “bad old days” when most doctors didn’t take Medicaid patients, making the ER the only source of care, and the need for this policy is outdated in the case of North Carolina. CCNC offers the country’s best Medicaid primary care access, but North Carolina taxpayers won’t have the opportunity to save money if people can’t also be discouraged from using the ER. I am doing everything in my (limited) power to convince the federal government to grant waivers to states whose access to primary care for Medicaid reaches certain thresholds.

Finally, even though CCNC has not saved money, I would strongly urge the incoming state administration not to sanction Dr. Dobson or his staff simply for retaining several teams of expensive consultants who are not certified in Critical Outcomes Report Analysis and therefore don’t understand the importance of testing their results for basic plausibility before producing outcomes report analysis that violate every rule of plausibility. (A “plausibility test,” as described in my book Why Nobody Believes the Numbers, would have revealed to the consultants that there were no significant reductions in ambulatory care-sensitive admissions, or in the two categories of admission — asthma and diabetes — emphasized by CCNC, revelations which would presumably have led them to question where the savings came from before releasing their report.)

Having said that, my “facile” peer-reviewed analysis in a prestigious academic journal (as well as my award-winning book) is correct, which is why I offered Milliman a $50,000 bet (if I lose this bet I am also offering to pay $25,000 to the state and apologize publicly), that they declined. Let me briefly review a few points to resolve the inconsistencies between my commentary and Dr. Dobson’s response to show why Milliman is wise not to have accepted my bet, even though it could theoretically also have earned CCNC $25,000 and an apology from me.

Dr. Dobson’s $711MM spending figure — which of course would be overall spending on all children including babies/neonates, not just admissions among 1-to-18 year olds – is not at all inconsistent with the reported inpatient spending of $114MM reported to the federal government for inpatient costs alone for the 1-to-18-year-old category. Dr. Dobson is also correct in saying that the $114MM figure represents charges, not claims paid. Medicaid charges and claims are close because hospital charges reflect only very small markups on those patients. Further, the $114MM also includes admissions for disabled children, who were not in CCNC, as well as many admissions far outside the scope of CCNC, such as pregnancy/delivery events, substance abuse and trauma, and therefore far overstates the admissions available to be avoided. Hence $114MM is a generous starting point on which to base admissions savings claims.

Even if the HCUP dollar figures are not quite apples-to-apples with Medicaid spending on hospitals, the admissions figures themselves contain no dollars, mooting the claims-vs.-charges sidebar. NC children’s admissions were almost unchanged, and tracked neighboring states almost identically, over the relevant period. If HCUP figures were unreliable, it would be an amazing coincidence that these states all had virtually identical, virtually unchanged admissions rates.

Following my observation noting the multiple impossibilities of extracting $250-million in savings from $114-million in admissions costs even though admissions did not decline either overall or in the targeted disease states or in ambulatory care-sensitive admissions, Both Dr. Dobson and Mr. Cosway now claim that their savings figures include all expenses and not just admissions-related expenses. As described in my response to Mr. Cosway, this argument represents a 180-degree departure from the Milliman report, which states that all the savings (and then some) are in admissions reduction.

Of the two opposite claims made by Milliman, their initial one in their report is correct: Most researchers agree — and the Journal of the American Medical Association recently confirmed — that non-hospital expenses increase in a medical home, where physicians are paid more, see patients more, and prescribe more. I would urge Dr. Dobson and Milliman to re-read this section of the initial Milliman report, as well as the above-linked JAMA report of July 26, 2012 and virtually all other research reports, before concluding that CCNC is the only medical home program in the country to achieve massive savings in non-admissions costs even while admissions rates were not declining.


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